"Why must you always be so negative when you write about Pixar?"

As a direct result of someofthe"Ratatouille"-relatedpieces that I've posted on JHM over the past few weeks, I have received a number of ... er ... colorful messages from Pixar fans recently. Here's one of the more family-friendly examples. Which came from Patty T. of Haines City, FL:

Why must you always be so negative when you write about Pixar? Don't you realize that, no matter how much that animation studio cost, acquiring Pixar was still the smartest thing Bob Iger ever did? It's time to face the simple truth, Jim. Disney will be making money off of this deal for decades yet to come.

To be honest, the way I see this story, Patty, nothing about this acquisition is simple.

Take -- for example -- the real reason that Bob Iger made that deal with Steve Jobs to acquire Pixar Animation Studios. I mean, sure. Money was a factor. But not the main factor.

No, Iger had to make this deal. Otherwise ... Well, that's how Wall Street would have defined Disney's new CEO. As the guy who let Pixar get away.

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And Jobs knew this. Which is why he really put the screws to Iger. Extracting a fee for that Emeryville, CA. -based animation studio that still sets tongues wagging whenever the topic of Pixar's acquisition price comes up in investment circles.

Let's face it, folks. $7.4 billion isn't exactly chump change. When Cerebus Capital Management paid out $7.4 billion to DaimlerChrysler back in May, they got an 80% stake in that company's North American Chrysler group. Which gave them control over 3,750 sales outlets and nearly 100,000 employees. Whereas Disney -- when it paid out the exact same amount -- got a single animation studio with 600+ employees that has (to date) only produced 8 motion pictures & 11 shorts.

And -- yes -- I know. The Walt Disney Company didn't actually plunk down $7.4 billion when it acquired Pixar Animation Studios. Whenever I bring up this topic on JHM, I'm immediately bombarded with e-mails & phone calls from senior Mouse House officials. Who quickly remind me that this acquisition was strictly a stock swap. With 2.3 shares of Disney stock being issued for every Pixar share. So no money actually changed hands.

Then these execs remind me of the billion dollars in cash that the Mouse got when they bought Pixar (Which then lowers that animation studio's true acquisition price down to $6.4 billion).

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They then direct my attention to the $2.7 billion that Mickey made in February of 2006 by selling off his radio stations to Citadel Broadcasting Corp. If you apply that amount toward Pixar's acquisition costs (Because, you see, Disney was deliberately selling off its old media holdings so that it could then aggressively re-invest in new media), you're now down to $3.7 billion.

Then when you factor in the $700 million that the Mouse will no longer have to pay out to Pixar for their share of past co-productions as well as future DVD, pay-per-view and television sales, the price drops to a mere $3 billion.

Seriously, folks. This is actually how people talk at the highest-most levels of the Walt Disney Company. "A mere $3 billion dollars."

Anyway ... Over the past month, I've begun hearing a revised version of this spiel. Which takes into account the $2 billion that Disney reportedly made last year off of the sales of "Cars" merchandise. Now -- if you actually buy into this sort of slip'n'slide math -- that then lowers the cost of acquiring Pixar to just a billion dollars.

Well, I don't know about you folks ... But whenever I hear this carefully crafted explanation, it becomes clear to me that Disney Company officials are still incredibly sensitive when it comes to talking about Pixar's price tag. They've obviously grown tired of having that Emeryville-based animation studio's name automatically linked to the phrase " ... which the Mouse just paid $7.4 billion for."

"And why is that?," you ask. That's because Mickey understands that there are only two things that actually move Wall Street: emotion and numbers. And given that the investment community was still pretty happy that Iger didn't allowed Pixar to get away, the numbers side of this equation didn't really factor into things until just recently.

And -- no -- I'm not referring to how "Cars" failed to meet its financial projections during its initial domestic run and/or how "Ratatouille" didn't make as much as had been expected over its opening weekend. I'm talking about other numbers now. Like the tens of millions of dollars that Walt Disney Animation Studios blew through late last year as they rushed to fix "Meet the Robinsons." All because John Lasseter & Ed Catmull insisted that 60% of that Steve Anderson film had to be re-animated so that moviegoers could then find it easier to embrace this story of a time-traveling orphan.

Back when "Meet the Robinsons" was released to theaters in March of this year, the financial community hoped that all of this additional production time & expense would eventually translate into a bigger box office take for that Walt Disney Pictures release. But -- as it turns out -- this Steve Anderson film wound up earning almost $40 million less domestically than the WDAS production that proceeded it, "Chicken Little."

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Then there was John & Ed's decision to significantly cut back on the number of projects that DisneyToon Studios had in its development pipeline. Last year, thanks to Lasseter & Catmull's direct interference, there wasn't a single new home premiere greenlit for production. Which is going to have a significant negative impact on Buena Vista Home Entertainment (soon-to-be Walt Disney Studios Home Entertainment)'s bottom line over the next 24 months.

These are the sorts of numbers that Wall Street is now paying attention to. Sure, the investment community understands that John & Ed are making these sorts of decisions only because they genuinely want what's best for the Walt Disney Company in the long run. And that -- three or four years down the line -- Mickey's adoption of Pixar's "Quality is a great business plan" mantra will hopefully begin to pay off big-time.

But in spite of all this talk of the Mouse House having a "Great Big Beautiful Tomorrow" ... It's also important to understand that Wall Street has a very short attention span. Which is why it obsesses with things like "How did your studio's movie do over its opening weekend?" and/or "What price was your company's stock selling at when the markets closed this afternoon?"

So while investment analysts may pay lip service to the idea that "Iger, Lasseter, Catmull & Dick Cook are basically reinventing the Walt Disney Company. In 10 years, you won't be able to recognize the place !" ... They'll also be looking for significant short term gains along the way. Which is why these folks aren't all that pleased to hear that "Ratatouille" is really struggling nowadays to earn as much as "Cars" did last summer during its initial domestic run.

I know, I know. There are those of you who say "Why should I be worried about what Wall Street thinks? What kind of impact could a bunch of suits who just read spread sheets possibly have on the Mouse House?"

Well, let's remember that Michael Eisner is no longer the head of the Walt Disney Company. And that change came about not so much because of the "Save Disney" movement and/or anything that the fan community did. But -- rather -- because the investment community lost confidence in Eisner's ability to effectively lead the Disney corporation. They wanted Uncle Michael gone ... And so he was gone.

And let's remember that Iger was the one in the passenger seat when all that happened. Observing first hand what happens when you fall from favor with Wall Street. So this is a man who is now keenly aware of the importance of keeping all of those movers & shakers happy. Which is why Bob -- more than anybody else at the Mouse House -- really wants this $7.4 billion Pixar acquisition deal to begin paying off ... but fast.

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So there you have it, Patty T. ... Where you see a "simple truth," I see a very complex situation. One where Disney's long-term hopes & future plans are constantly being tripped up by the company's short-term needs & financial expectations. Will all this extra effort & expense ultimately pay off in the end? I'm afraid that we won't really have a definitive answer to that question until four or five years down the line.

And until we get that answer ... I'll continue to report on what I've hearing from my friends who work inside of the Walt Disney Company. Both the good AND the bad stuff.

And if that type of coverage still manages to upset a few of you Pixar fans ... Well, there are lots of other websites out there that only publish positive pieces about the Mouse House. And I'm sure that any one of those sites would genuinely welcome your patronage.

Thanks for the article and for addressing your readers, Jim. It is appreciated.

I'm wondering, do you have any friends in Disney that actually have good things to say about Pixar? Because it just seems like most of your contacts think Pixar can do no right when it comes to working with Disney in this new capacity.

>>> Back when "Meet the Robinsons" was released to theaters in March of this year, the financial community hoped that all of this additional production time & expense would eventually translate into a bigger box office take for that Walt Disney Pictures release. But -- as it turns out -- this Steve Anderson film wound up earning almost $40 million less domestically than the WDAS production that proceeded it, "Chicken Little." <<<

Seems like a conundrum to me. I suppose they could have just allowed it to be released without any changes and just focus on the future projects. It would have probably made the same amount of money but at least the extra money fixing it wouldn't have been spent. But at the same time, would MTR have been marketable later on without the changes? I can see it perhaps making a bit more money in later years because it did turn out to be a pretty good movie.

>>> Then there was John & Ed's decision to significantly cut back on the number of projects that DisneyToon Studios had in its development pipeline. Last year, thanks to Lasseter & Catmull's direct interference, there wasn't a single new home premiere greenlit for production. Which is going to have a significant negative impact on Buena Vista Home Entertainment (soon-to-be Walt Disney Studios Home Entertainment)'s bottom line over the next 24 months. <<<

Did DisneyToon Studios have anything in its development pipeline that wasn't a sequel or that wasn't taking a beloved character from a classic and reinventing them? This is a real question, because if the answer is "no," then I'd understand this move since they are coming in with the whole "sequels are evil unless they are better than the original" mentality. If "yes," can you tell us why Lasseter and Catmull did not greenlight them?

>>> So while investment analysts may pay lip service to the idea that "Iger, Lasseter, Catmull & Dick Cook are basically reinventing the Walt Disney Company. In 10 years, you won't be able to recognize the place !" <<<

Again, are you in contact with anyone in the company who aren't just paying lip service to this idea but actually believe it?

It seems at the very worst, Lasseter and Catmull would just be relieved of their power, but most likely they'd just go back to Emeryville running things at Pixar. Iger would then have to trust the suits with greenlighting projects, and Disney Animation would probably end up becoming like Dreamworks Animation (which isn't entirely bad I suppose if we're talking about money; it's just not the Disney I grew up with); and Pixar would still be left to make quality films using Disney's money. That's something I could live with.

Amen Jim, Amen. Hopefully all the complainers will sit up and listen. Information like this is half the reason I come to this site.

As someone who works in the industry let me add the following: I always want art and quality to triumph over greed and short sightedness. I bemoan when quality product is struck down or not given the respect it deserves merely because of monetary concerns. That being said at the end of the day this IS a business. As much as I want to produce quality work I can be proud of, I also have to be mindful of the need to feed my family. The business side DOES mater. It is what allows the artistic side to exist. I personally consider Pixar not only to be the greatest movie making entity currently active but also in the entirety of the history of motion pictures. Strong words I know. I love Pixar and want them to succeed. But at the same time I REFUSE to bury my head in the sand and pretend there is nothing wrong. There are problems right now with the business side of the equation.

We all be need to be concerned by the 'poor' showing Pixar has had lately. I know many people take offense at the usage of the word poor and when looked at on their own Cars and Ratatouille seem like successes. $244,082,982 domestic gross sounds like a smashing success for Cars when taken on it own. But look at the bigger picture. I think Ratatouille is hands down the best movie I've seen this summer. As much as I had fun at Transformers and HP 5, from a pure quality standpoint there is no comparison. The Box Office number do not back this assessment up however. As of July 15th Transformers has made 224,009,583 and was released July 3 while HP 5 has made $139,715,157 since its July 11th release. In comparison since its June 29th release Ratatouille has made $142,997,082. Starting to see what I mean about the bigger picture.

And yes people like to say 'well of course those movies are doing better they have establish brands and Cars and Rat doesn't'. Except they do have an established brand. They have Pixar. At one point putting Pixar in front of a movie not only guaranteed a quality movie but a financially successful one as well. The sad truth is that now that is no longer the case. It's an upsetting fact and I think is part of why people are becoming so defensive. It is damn frustrating that Cars and Rat are not making the kind of money they should be. It pisses me off every time I think about it. That doesn't mean I am going to shoot the messenger though. Jim is just repeating what he his hearing. He's not attacking Pixar or trying to bring down Lasseter or any of the other crap I've seen spewed out on this site by readers over the last few months. I suspect he knows what I know: Numbers like above are what the people who have the power to determine Disney's future will be paying attention to. Not quality and relative triumphs. Combine that with the fact it looks like the next Pixar movie will be the most daring and challenging mainstream animation release in history and the reports of the lack of shelf life for some Pixar characters with kids today and well... I find there is plenty of reason to be nervous.

I truly hope everything works out for the best I really do. Hopefully these problems will in time turn out to be nothing more than minor speed bumps on the road to the restoration of Disney. A few years from now we will all look back at this and laugh. (Insert favorite cliché here.) Like Jim said only time will tell. Sorry for going on so long. I don't talk often but when I do I have a lot to say. :) Till next time. TTFN (Ta Ta For Now).

It's not the posting on the good and bad that people find annoying Jim. Well let me speak for myself along......its not what I find annoying. It's the continual beating of the same drum. A drum with no merit. Your a numbers guy right...take a look at how the DIS stock has done over the last year.

Notice anything? See how the line goes up. Is Bob Iger really worried about his job? I mean really Jim...do you believe that? Your "friends" within the Burbank based studio can tell you whatever they want....and your opinion just falls in line with what they say...or do you think about it and form your own opinion.

Under Eisner, Disney's stock was in the toilet for years..YEARS and no Wall Street anybody showed him the door. His contract was coming up for renewal and he left early....Wall Street pressure?...maybe....but he needed to leave WAY before he did.

Again look at the stock growth over the last year; Iger's not going anywhere.

And for the record....no Pixar fan boy here. I enjoy their work, sure..I'm a fan...didn't care for Cars and haven't seen Rat yet. Please, for the love of god, can we stop talking about the success and/or failure of films until they complete their theatrical run....

Great article.... and all of a sudden we are given a clue as to what the real problem is.

It was the re-working of Meet the Robinsons and all of the resentment that came with it. Its understandable .... new management coming in and changing what certainly may have been a labor of love for someone.

Well.... In my own company there was an "acquisition", and right off the bat there were two camps. One from the north and one from the south. Let’s put it that way. For the better part of two years some serious "integration" took place. In the end ... our original products were completely scraped and moved to end of life while the new product suddenly became the flagship product. All of us in the original company had to face the fact that the new product was simply better, despite the fact that we were the "purchaser" in the deal.... we were now "owned" by the new folks.

Today ... we are much better off... and our product is doing very well in the market against the competitors. There are still some people lurking with the old mindset.... but for the most part we are one.

What did it? What finally made it work?

Well.... I hate to scare everyone out there ... but they dropped the other company’s name. It didn't have to be that way... If everyone played nice they could have preserved their name... for nothing more than a tribute and nostalgia ... but they didn't play nice ... and so the board decided to drop all names and all hints of their origianal orgins.

Once "Pixar" stops being called Pixar ... and simply becomes "Disney" ... there will be no turning back ... and the "rivalries" will stop. This may be the call Iger has to make in order to even the playing field and to get these kids to see themselves on the same team.

Will Lasseter walk if he is suddenly told he could no longer use or recognize the word "Pixar".... I don't think so.... I believe that he would choose to honor Walt in the end. Perhaps Pixar came to Iger because they know that Disney is where they belong.

Nice article, but, umm, it's Disneyland's 52nd anniversary, and you put up another Pixar article. I guess I was kinda expecting some sort of update on nemo's operation and toy story mania's construction and the wonderful world of color show, as opposed to an updated version of the "explaining why you're so hard on the Pixar acquisition" article that you wrote last summer.

Considering the sheer amount of competition in Hollywood this summer, "Ratatouille" will probably be seen as a success. Even though it takes place in France, even though its main character is a rat, the film has great word-of-mouth and will most likely hit 180-200 million by the end of the summer. Even if this doesn't impress Wall Street, its just not going to cause much in the way of questioning the Pixar purchase anymore. The purchase is in the past now, and Wall Street doesn't care about that price anymore, as long as Disney makes good use of what it bought. The Finding Nemo Submarine Voyage is just one example of how Disney has done well with its union with Pixar

Does anyone ever talk about the massive failure that was the Fox Family purchase anymore? Not really, even though I can't see how that was a success for the Disney company. The Pixar purchase, on the other hand, still has the potential to be a roaring success with the passage of time, so as long as its films continue to make some money and Disney is able to use those films and characters to greatest effect.

And besides, at least Disney can say it had nothing to do with "Evan Almighty," as that failure has taken all attention away from "Ratatouille" potentially not meeting its goals.

So... am I the only one finding it difficult to believe that not wanting tobe known as the "one who let Pixar get away" is the MAIN reason Iger made the deal? I am not saying it might not be part of it, but I find it difficult to believe it was the main reason.

And even more to the point, you make it sound as if this would haunt him forever on Wall Street, then turn around and tell us that Wall Street has a short attention span.

As for Jim having contacts that think things are going well with Pixar --- well, the people who tend to talk and/or complain are the ones that are unhappy. Think about it - if you were unhappy at work, wouldn't you be tempted to be able to vent anonymously? This is what Jim provides. If you are happy at work, how many of you are tempted to go tell the world about it??

Be honest Jim....the truth is there are two reasons you're negative about Pixar: Greed and ego.

1) Greed: History on this site proves that when you take Pixar to task, you get more hits, more comments, etc. So your ad revenue goes up. That's why we get one of these articles just about every week. So those who think you're wrong (which seems to be just about everyone with a pulse) can come to your site in droves and TELL you how wrong you are. And no, your snarky little suggestion to "go elsewhere" doesn't prove it's not about greed. It just proves you don't want it to LOOK like it's about greed.

2) Ego: You just can't get past the fact that Pixar is turning out to be a pretty decent deal. You don't like the breakdown the "suits" are using...but you claim to be a numbers guy? The truth is....Pixar, and the properties they've created so far, are making boatloads for Disney.....better than anything except the Pirates Franchise (and maybe even them, when you take into account production budgets). But, since you poo poo'd the deal when it happened, you just need to point out, every time you get the chance, that you "were right" (even though it's quickly becoming apparent you're not....and you're killing your credibility by claiming otherwise.

I've not seen ONE wall street analyst take Disney to task over Rat's BO. Not one. Now, those folks are usually pretty chatty about stuff like that....Disney gets mentioned by analysts pretty often in my experience, yet...since the opening (which DID fail to meet expectations....I've not seen ONE other mention of Rat.

Yet Jim keeps insisting the ethereal "analysts" are worried.

Also, everyone needs to keep something in mind: Total Box offce is important...but profitibility and ROI are much MORE important.

Pixar was worth the cost by if only because Steve "make money by producing quality pictures" Jobs is now the majority stockholder, not Michael "make money by cutting costs and overmarketing" Eisner. Not to mention ME's habit of firing any competent executive at Disney - a bit insecure, maybe?

However much it cost to get that guy out of the driver's seat was worth it. Getting the Emeryville based animation studio in the process (sorry evilash43 - couldn't resist) is icing on the cake... er, saffron on the mushroom.

I think the Online Disney community is always critical becuase it is about the money, a throw-back to the Michael days. Money does make the world go around and without Micheal E. than some of the things we see today might not be possible BUT he was a little off on his own at the end.

Bob seems to be doing a great job bringing things back. Sure it might be about Wall Street is is motivation but the company does seem to be returning to us fans.

I think the Pixar acquisition is more than a money issue. The talent etc that is now more part of Disney DNA than some of the Disney stuff was. Their movies are delightful and I say birng on more Pixar...they seem to have the spirit of Walt!